tv Closing Bell With Maria Bartiromo CNBC January 16, 2013 4:00pm-5:00pm EST
that stock down 3.5%, accounting for 20 dow points to the downside. after the bell, we'll get ready for ebay earnings. the street is looking for 69 cents a share on $3.98 billion. had a pretty good run though well off the highs right now at $52.92. a quick look at the chart from my friend benedict willis the third, year to date to the s&p, up 3.2%. do we continue higher, sir? >> yes, eventually. there may be a pullback in between the time of the apple comments and suggesting there could be a pullback but still positive by the end of the year. today is a great example of a market of stocks. apple having the effect opposite direction and boeing had the downside on the dow. >> you like the bank stocks, the earnings so far? >> i do. i think you have to keep an eye on the interest rate spread and how they will be profitable and that some banks will have the opportunity producing mortgages in lending, but that's -- they have already are their run for a
while. >> that from the bullish ben willis. thank you, sir. that does it for the first hours of the "closing bell." dow down 25 points. stay tuned for ebay's earnings among others with the second hour of "closing bell" and maria bartiromo. see you tomorrow. and it is 4:00 on wall street. do you know where your money is? hi, everybody. welcome back to the "closing bell." i'm maria bartiromo on the floor of the new york stock exchange. the market is snapping up a five-day winning streak. the dow jones industrial average finishing lower today after five days of gains. as you can see, the dow jones industrial average down about 27 points at 13,508. nasdaq and s&p 500 higher just by a fraction. the nasdaq picking up 6.75 point. certainly sold off from the highs. by the end of the day, technology still one of the better performers on the street. s&p 500 higher by a fraction. the banks mixed to fractionally better on the session. just moments away from ebay's quarterly numbers. first though let's get straight to the market action. joining me right now is jeff sought from raymond james and
jeff ickes and our own rick santelli. and another from the floor of the exchange coming up in a moment. gentlemen, nice to have you on the program. thanks so much for joining us. >> thank you. >> let's talk, jeff, about the earnings period so far. how would you character it? >> the earnings that were being revised down all through the fourth quarter, that reversed about three weeks ago, looking for fourth quarter earnings to be up about 3.2% by the time it's all said and done. >> do you think that's priced into the market? are you expecting any surprises for the fourth quarter? >> i think the earnings are going to come in stronger than most people think. i think the big unspoken event that's happened over the past two days is that the transportation average is broken out to new all-time forever highs, and i don't hear anybody talking about that and that's pretty burlish for the executive sensitive trannies. >> let me get your take of where we are in terms of the economy.
a discussion about the fed earlier in terms of the beige book numbers. what do you think that tells us on where we are in the economy? >> look at numbers of the last week or two, retail production numbers for december, and they were actually pretty good. of course, the employment numbers we already know were soiled, and this is in a period where the uncertainty over the fiscal cliff was reaching a maximum. you know, maria, you think that's pretty encouraging that the economy has managed to cope with a high level of uncertainty. now the thing that kind of bothers me though is i'm a little bit worried that this coping is flipping over to complacency. the vix is now at a six-year low, and it tells me that the market is discounting 100% probability that we get through the debt ceiling without any trouble. that seems too high to me. >> so do you think the market is expecting that? i mean, when would you expect a big change in terms of the interest rate scenario? >> in terms of the interest rate scenario, probably nothing this year. i mean, we're at least a couple years away from a higher move -- a move higher in interest rates.
what i think is perhaps more likely to hit the market is signs towards the end of the year that the fed is going to come to an end in terms of additional quantitative easing. not only do we have perhaps gathering evidence that the economy is getting better and doesn't need more, but fed officials are starting to get a little nervous about how big their balance sheet is getting. >> sure, sure. >> kenny, are you with us on the floor of the exchange? >> i'm here. >> felt like things were worsening a bit but i know there's a fair amount of stock to buy in bank of america and the handful of financial. >> volume down here was 585 million shares. still talks of kind of investor complacency and people not really sure where to go. you see the market struggling with 1475. had the great earnings out of goldman sachs and jpmorgan this morning. would you think that the market would rally on that, more so than it did. apple was up almost 4.5%, but the market continues to be stuck here, and all that tells me is that those broader macro issues, and i think it's the debt
ceiling and sequestration talks, are really keeping the lid on the market so i don't suspect you'll see a real move up and through 1475 unless there's clarify coming out of washington. that's what i think the market really wants to hear. >> it sure does. rick, do you want to hear that? >> no, i don't think we will. but i do think the republicans are probably going to be more inclined when they come up with the weekend restreet strategy to pay more attention to the sequester side of the equation, my opinion. i agree with greg ip. if you're looking for the big run up in interest rates in 2013, at least in my opinion, you're going to be disappointed. here's what i still can't reconci reconcile. the beige book didn't give us a positive grow on jobs and on the 30th of month we'll look at the annualized pace of growth in the form of gdp, looking for 1.5%. another year where we don't see big tax revenues coming in because we're not creating a lot of jobs. the economy is growing less than 2%, and we're still bragging about what a great year it is for stock returns. >> maria, can i jump in here for
a moment. >> i think, rick, got to stop looking at the glass being half empty. it will be a weak fourth quarter but that's mostly because of weak exports and inventories. the u.s. consumer doing pretty well. >> what about all the activity we pulled from the first quarter based on the fiscal cliff you? think the first quarter is really going to be that much better? >> look at the information we have now. a pry pry try survey done by isi of home builders and said january will be a blockbuster month for home building, and let me bring up two other points that don't get mentioned here. the mortgage foreclosure settlement and a couple other things on the regulatory front, the liquidity ratios being eased up, a very good environment for lending, very solid for housing. i can see a lot more reasons to be positive than negative right now. >> if interest rates went up 100 basis points, you think housing would do as well? >> you think they will go up 100 basis points. >> my point is housing better do good at historically manipulated low rates. i don't see that it's bragging
rights here. >> right, right. the minute interest rates going up, where is the blockbuster in housing building taking place, in the midwest or takingce in new york city, new york, the tri-metro area, boston, chicago, where is it taking place because housing in and around the new york metro area is not going off to the races? >> well, you're going to see it across the country. that seems to be what the surveys are showing. now, the latest survey of the national association of home builders suggested things were a little bit flat, but you're going to get rebuilding after hurricane sandy in the northeast, and there are bidding wars in places like phoenix and parts of florida that used to be soaking in excess of supply. >> bidding wars in phoenix and florida where you can buy a condo for $150,000. can't buy a park space in new york for $150,000. the bidding wars makes -- make me nuts when people say bidding wars in housing. it's not happening! >> well, you know, new york didn't go down the way like phoenix went down, right? or the way vegas went down either. >> right. >> so that's one thing to
consider, but jeff saut, is there an investable item around whatever you want to call this housing recovery, bump up? i mean, some of these stocks have been on fire. >> yeah. we think the building stocks, the home builders have gotten ahead of themselves. downgraded them a few months ago. the second derivativeys on housing, and i can tell you the housing recovery down here in florida is for real. the multi-family has been on fire, and you're just starting to get a hookup in the single-family homes, fanned that gains traction, i think greg is right. you'll see the housing numbers come in stronger than most people think. second derivative play is a company called raniere timberlands, a play on lumber and a play on a number of real estate investable themes. >> all right. so you are playing that. what about technology? what do you make of this move in apple to the downside? what do you make of some of these huge moves in research in motion? is it really a stock picker's
market in tech? >> absolutely a stock picker's market in tech, and i think one of the ways to get at tech again and a second derivative play, quite evident that your mobile device is going to be your computer in the future and the tower storks which granted have had pretty good runs, is like real estate in the sky. you hang more bandwidth on the tower stocks so we think they do good going forward. >> seeing that kind of activity in those stocks, ken? >> it is very specific, he's right, so people are going to make the moves and you saw what happened in apple, right? a lot of people came out of it. i think it's actually overdone but tech is going to be very specific, and you are seeing very specific moves not in the broad sector but in individual names so i absolutely agree with him. >> thank you very much. outside of wall street, a big story millions of americans are following today, president obama announcing sweeping gun control measures just a few hours ago. eamon javers at the white house with the story. over to you, eamon.
>> reporter: an emotional ceremony here at the white house when the president unveiled a range of ideas to combat gun violence in the united states, including a new assault weapons ban, limit on the size of magazine clips, enforced measures for background checks and increased access to mental health in this country, and the president said that lawmakers on capitol hill are going to be facing a dramatic choice. >> what's more important? doing whatever it takes to get an "a" grade from the gun lobby that funds their campaigns or giving parents some peace of mind when they drop their child off for first grade? >> now, the nra itself putting out a statement this afternoon saying attacking firearms and ignoring children is not a solution to the crisis we face as a nation. only honest law-abiding gun owners will be affected, and our children will remain vulnerable to the inevitability of more tragedies. so, maria, we're setting up here for an intense political fight up on capitol hill. republican speaker of the house john boehner reacted tepidly,
his spokesman putting out a statement saying they will look at the ideas and if the senate passes a bill they will look at that but no commitment to bring a bill to the house floor. >> the president had children around him during the press conference, right is. >> and many of the children were victims of gun violence themselves or were aware of victims of gun violence and wrote letters to the white house. in fact, some of these children wrote letters that the president read from, remarked upon. it was a very dramatic and emotional setting there because the children sort of making the point and reinforcing the president's point that in his view this is about protecting first graders and their rights to go to school safely as much as it is about second amendment rights for gun owners. >> thank you so much. eamon javers with the latest there. boeing dragging down the dow today as yet another problem is grounding some boeing dreamliners. phil lebeau with the latest developments out of boeing. we'll speak with an aviation expert who says it may be time to ground the entirefield fleet. moments away from ebay's
welcome back. we're moments away from ebay's earnings jon fortt will be breaking down the numbers once they come out. we want you to talk about the company and what to expect with david garrity of gba research. good to see you both. david, let talk about ebay and what you're expecting. estimates call for 69 cents a share and 3.8 billion. what's the biggest takeaway here? >> the biggest thing is to look and see how much they capitalize on mobile. both mobile for commerce and mobile as well for the use of their papal service. if you look at some of the trends that were out there. it seemed overall that december had maybe a little bit slower pace of activity than november, but the indications were that the mobile channel actually put a very strong finish around the holiday season for ebay, so hopefully we see that coming in the numbers. we look for something better
than consensus, both on revenues as well as earnings. >> what do you think, john? papal one of the most important parts of the business? >> papal certainly is, but given that this is the holiday quarter, i think there's potential upside in the marketplace business, particularly on the u.s. side. channel advisers numbers were pretty strong based on a lot of -- compared to a lot of analyst estimates that i had seen, so there could be some upside there as if ebay did as well as some of the researchers think. >> how much of the ebay earnings will be due to efforts in the mobile space, do you think? >> volumes are starting to increase fairly substantially. ebay indicated they should do better than $10 billion in terms of gross merchandise value over mobile as a channel. we'll have to see as they start talking about 2013 to what extent there's further upside for them in the channel. >> in terms of the conference call? what would you like to hear, david? what are you focused on in that conference call? >> certainly one mobile as we've just discussed. secondly we're looking at the guidance for 2013.
consensus numbers for eps are about 274. we'd like to see some upside there. ebay's done great as a stock in 2012, up about 75%, but a lot of that has been due to multiple expansion going from 11 times earnings. >> let me give you the numbers. ebay earnings are out 70 cents a share on revenue of 3.99 billion. the estimates called for profits of 69 cents a share. getting a profit of 70 sent a share. estimates called for revenue of 3.98 billion and a revenue number of 3.99 billion. it looks like a fractional beat on the top line and the bottom line. we're waiting on guidance. real quick on that? >> i've got, that maria. >> i'm sorry? >> got the guidance here. >> go for it, jon. >> for the next quarter they are guiding to a mid-point of $3.7 billion in revenue. wall street is looking for 3.79. they are also guiding to a non-gap eps mid-point of 61 cents and the street wants 63. interesting to see how that will
be interpreted. ebay does tend to guide conservatively as many do, but those numbers are below what people are looking for in the current quarter, mar why. >> what's your take? >> my margin beat in the fourth quarter will offset the modest guidance coming in short of street expectations for the first quarter. people look at what guidance ebay gives and says, the company is rock solid in terms what have they do. this is a company that's basically met or beaten guidance since 2005, so we look at the guidance here as being an absolute floor. >> the guidance being an absolute floor. >> yes. >> now in terms of papal, still waiting on the breakdown, john, any news in terms of the breakdown of the sectors yet? >> i'm starting to go through that, and i'll have better numbers for new just a moment. i zoomed ahead to look at the guidance. >> in terms of a growth rate in, terms of revenue, david, what would be an appropriate growth rate from your standpoint for the year. >> i mean, the company's been sort of growing their top line
and bottom line at about a 16% to 17% rate. i think a bit of an acceleration, probably something closer to 19% to 20% would be appropriate in order to support the valuation that the company has now. where the company is trading ahead of its growth rate. >> in terms of the -- the stock, would you buy it here? i mean, bottom line here, would you put new capital to work here in ebay, david? >> unless we see something coming out of the call that says we'll have an acceleration in terms of the growth trend, last year as we indicated earlier it was all about multiple expansion on the stock. it's been a huge stock in 2012, up 75%. don't think we want to chase it unless we see something in the guidance or the call that gives us greater confidence of acceleration from here. >> john, any news in terms of the divisions you want to get to before we wrap this up? >> i would like to quickly say it looks like they hit with papal total mobile payment volume of 14 billion for 2012.
that's around what i think was expected. total payment volume up 25%. from what i'm seeing here in merchant services. >> right. >> gosh, i still need a little bit more time to go through those numbers and make sure that i'm quoting them correctly, but the numbers look to be in line to slightly better, as would you expect from a top line number from what analysts were expecting. >> jon, any headlines we'll get back to you. the stock traded higher initially and is now trading negative. gentlemen, appreciate your time tonight. ebay president and ceo john donahoe will have one broadcast interview tomorrow and we'll speak with him about what's driving the business, including papal. that's tomorrow at 3:30 p.m. eastern. boeing's dreamliner nightmare is uing. half the fleet is grounded after one of the planes is forced to make an emergency landing. a full report after this short break.
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banks, new highs. take a look at big names, the ones you might expect. jpmorgan. good enough earnings report. goldman sachs terrific earnings report. both of those are new highs and key corp a new high. we'll get to some of the regional banks next week. also, a lot of interest in banks in general. there's the xlf. the etf for the banks. you can own that. that is right near a new high. the volume that is picked up recently. i hear there's a lot of options activity in some of the months out a few months from here so there's continued interest in buying into the bank group. airlines, another new high for the airlines, one of the ones that hit new highs today but the xal hit a new 52-week high. paying down their debt. they are raising their prices and have limited capacity. so far, so far, airlines firing on all cylinders. not everything was up today though. steel stocks were down. they have been down many days this month, even though they started on a positive note here. carpenter, one of the big companies had a disapoipgt commentary on steel demand, still -- still out on whether or not we want to get big steel demand in 2013.
finally, maria, if you want to know why the dow is down and why the s&p was up, look no further than boeing. you see that down $2.60. that's almost 20 points on the dow. that's why we had that disparity between the dow and the zmpt by the way, s&p did downgrade their opinion on boeing to healed from a buy. maria, back to you. >> all right, bob, thank you so much. details now in the latest developments in that boeing dreamliner problem. two japanese airlines which currently operate about half of the active fleet have ground the planes. phil lebeau on the story. phil. >> reporter: just getting reports, one out of australia that quantus is luis aliceaing it will stand by its order for new drainieeamliners. a total of 57 airlines and/or customers have ordered these planes v.5 been delivered. the backlog, they still need to build another 798. almost half of the dreamliners already delivered, 246 them,
they are grounded because they are owned by ana and japan airlines out of japan. they grounded them yesterday after the ana emergency landing. by the way, boeing, the faa and ntsb, they all have investigators heading to japan to investigate what happened with that emergency landing. meanwhile, other airlines, which have already taken delivery, they are still flying the dreamliner. this is out of poland making its inaugural flight of the 787. right now, as we speak, maria, in a couple hours. it will be touching down here in chicago. despite airlines saying we're still going to fly, it s & p capital iq downgrading shares of boeing on the concern, maria, that eventually we could see some airline customers saying, you know what, putting me on the dreamliner, i'm skipping that flight so that's the latest of what's happening with boeing. maria? >> want to bring in a couple other voices, michael boyd, aviation expert and on the telephone jim hall, former ntsb chairman, now managing director of hall & associates.
good to see everybody. thanks for joining us. would you fly a dreamliner right now? mean, knowing what we know, jim hall, would you -- what would you job advice? >> oh, yes, i would fly the aircraft. i think if there are significant issues found that the regulators will take appropriate action. >> should the -- should united ground its 787s? >> no, no. >> you don't think so? >> i don't think so. >> michael boyd, what do you think is behind this? it seems to me this story gets bigger and bigger. i'm wondering if there's a structural issue here. >> no, i don't think there's a structural issue. everything is focused on the 787. last week someone said, you know, a 787 had an engine leak. airplanes leak oil like old ebak studebakers, it happens all the time. i would get on one. remember, you ground airplanes for a variety of reasons. like the japanese carriers may have grounded it partially because of a reliability issue.
they don't want the airplanes stuck overnight in jakarta where there's no mechanics or no aaa to call to get a new battery. >> phil, isn't this more than the usual shakeout for a new plane? it seems like it's deeper than -- than just, you know, kinks in a new fleet. >> and maria, that's because what we're talking about here are lithium ione batteries, two incidents. yesterday in japan and then last week in boston. both of those involving lithium ion batteries. in boston there was a fire and in japanese reports of smoke in the cockpit. that's when you're getting into an area of just working out the kinks. it may ultimately be these were two batteries that didn't function and the system, the airplane handled everything the way they are supposed to handle the malfunctions when they are happen, but that's what they are trying to figure out. it is deeper than just working out kinks. >> michael, are the boeing dreamliners different than the airbus planes, for example? >> entirely. they are all very, very different. i mean, this is an airplane with
a whole new production track and design track, all new materials, so you've got to expect some things happening with it and an abundance of caution, but boeing has to look forward to not only airbus coming out but also bombardier with their new airplane that will be out in two careers that will be a real competitor to the 737. so they got to make sure the 787 works so they don't lose any customers across their entire milieu. >> jim hall, from an investment standpoint, what can you tell us? is this a concern for boeing stock? >> well, i'm not an investor in this issue, but i can say from a safety point it's a significant issue and one i think that the ntsb investigation is focused on, and the only bad news there is usually an investigation like this will take several months in order to come up with any conclusions. >> all right. we will leave it there. gentlemen, thank you very much. we'll keep watching this evolving story, of course, and
will see you soon. appreciate your time tonight. >> up next, which dudes may be buying dell as his rivals contemplate taking dell private. i'll talk about private equity giant kkr of what he thinks of these reports over a deal. you won't see this interview anywhere else. keep it right here. plus, will rising commodity costs melt down wendy's bottom line? sure hit chipotle stock. wendy's ceo speaks with me exclusively on the other side of this break. also, jane wells will do anything for a good story. she's been working out on a treadmill. jane. >> reporter: maria, let me put down my big gulp. as you know the camera adds ten pounds and this is a rough business to be heavy n.well, maybe every business is a rough business to be heavy in, especially if you're in channel. we'll talk about that in a minute. ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪
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welcome back. talk about working your way to the top. a new study shows ceos have one thing in common. twim waist lines. jane wells has been working up a sweat over this one. over to you, jane. >> reporter: maria, you are what you eat, but are you eating profits when you eat too much? now, the center for creative leadership tells the "wall street journal" that people perceive trim ceos as being more successful, think jeff bezos at amazon and the opposite of a ceo that's overweight. is it true. take carlos slim. he's not exactly slim, but he's one of the richest guys in the world, or gary ludman, running cesares for ten years. however, the stock is down more than half since going public about a year ago. as for political chief executives, well no, one has less body fat than the president of the united states who managed to win a very contentious re-election contest. chris christie has managed to be elected a republican governor in
democratic new jersey and he's a big guy which some people are worried he may not be healthy enough to be president because of that. a whole other study done in "psychology today" a little over the year ago that says a wider a ceo's face is the, the more aggressive and successful he may be. only talking about hes here. let's take a look at a couple of examples. one of the most successful and least successful stocks in the fortune 500 last year. u.s. airways versus super value. the ceo of u.s. airways is doug parker. his face is kind of wide, but the ceo of super value which didn't do that well, he isn't exactly gaunt, so, maria, i don't really know what to tell you. all i know is one thing is neither study talked about women ceos. back to you. >> weren't going into that one. >> not going to touch it. >> thanks, jane. jane wells, wendy,'s, meanwhile, one of the top burger chains in the united states, speaking of posting better than expected numbers for the fourth quarter.
stock up 3% on the heels of the numbers. how are rising commodity costs impacting the company going forward? joining me right now is ceo emile broelic, here for an exclusive interview. we'll, of course, talk about results, sir. good to have you on the program. thanks so much for joining us. >> thank you, maria. >> i want to ask you to comment on that report we just heard. ceos are thin and fit. you seem to be living proof despite running a burger chain. how do you do it? >> we have a great variety of products, and there's a lot of healthful options in our menu and some of my favorites are a small chili and a plain baked potato for lunch and with a diet coke it's a very calorie-contained item, so we have a lot of great options for people, and if you use our app on our website or mobile devices, you can create a variety of meals with the calories you want in them, maria, so it's really up to you. >> all right. so you can do it is the bottom
line. >> let's talk about the quarter, sir. how would you characterize earnings? >> we had a great, great quarter. our ebitda was up $15 million in the fourth quarter, some 19%. we had overall revenue growth as well. we did a great job of managing costs in the quarter, and -- and that produced great results for us, and we're optimistic about next year. we've given guidance to the street of 350 million to $360 million of ebitda, and we're quite confident we can deliver on that. >> what are you expecting from 2013? what's your take on the economic environment right now? >> well, you know, we expect that it's going to continue to be a challenging environment, and maria, as an organization we're very focused on the things, you know, that we can control in the marketplace and that's how we market our brand, product innovation and how we execute at the restaurant level, and image activation where we're reinvesting in our restaurants at a very aggressive rate is really producing some phenomenal results.
these are the things that we can do to move our brand forward, and we have a lot of confidence in it. >> so, let me ask you about the commodities cost and, of course, this is something we've been talking about throughout the earnings season. chipotle today citing higher commodities expenses and going to impact their earnings through the fourth quarter. has this been the case for wendy's? what are you seeing. >> in 2012 we saw a 90 basis point increase in commodities which is roughly 3%. as we look at 2013, we're looking for something in the area of 90 to 120 basis points so roughly in the 3% to 4% range, so -- but we have already built this into our -- our outlook for the year, so we think it's a manageable increase. >> a manageable increase. are you going to be passing that on to customers, raising prices? >> no, actually. we've not assumed a lot of price increases next year. it's a very competitive environment out there, but we --
we believe by a certain marketing mix that you're able to manage your average check in a way that you can get a check increase in a way that's acceptable to consumers and not actually take price increases. >> all right. we will leave it there. sir, good to have you on the program. thanks so much. >> okay. thank you, maria. >> we'll see you soon. one media company meanwhile moving in the after hours trading session. want to take it over to julia boorstin for a quick market flash. over to you, julia. >> thanks, maria. cvs shares shooting higher a hours 8% higher after the company announced its plans to divest its europe and asia outdoor business while it spins off its outdoor business here in the u.s. into a reit. this fits into a plan that les moonves discussed last year divesting non-core assets, spinning off its u.s. outdoor position to a reit and looking to sell that business in europe and asia. back over to you. >> what does top brass at equity
giant kkr think of a possible buy youth? a discussion about how to allocate capital. and a discussion of boosting corporate earnings for the back half of next year and we'll get you prepared for tomorrow's opening bell. wall street's money pros weigh in. you can't miss that. back in a moment. mart, humana medicare plans now include 5% savings on great for you healthier foods at walmart! it's part of the vitality healthyfood program... and one more way humana medicare can help you choose what's good for your health and your wallet. so you can spend a little less money... and spend a little more time sharing what you know with the people who matter most. humana. ♪
tradings session. seema modi running through the notable movers and shakers. over to you. >> reporter: muted gains and losses for major indices and when you dig deeper there were a couple of big movers to take note of. genworth financial topping the market after it said it would distance itself from its mortgage insurance business. comerica shares higher on stronger earnings, and take a look an intertell, that stock gaining after announcing a collaboration with facebook. now, on to the losing side. chipotle shares under some heat after the burrito-maker warned higher food costs would bite into its margins and more trouble supporting boeing's 787 dreamliner program. that sent shares sharply lower, thestock stock shaving 20 points from the dow jones industrial and bny melon, revenues lower and that's why that came in lower. goldman sachs, went to an 18-month high and tomorrow we'll hear from bank of america and citigroup so keep a watch out on
those two stocks. for tech, apple shares staging a strong comeback in today's trade, and research if motion, that stock continues its move to the upside. anticipation building ahead of its blackberry 10 launch on january 30th. losers in tech today though included google and amazon as well as dell after the pc-maker gained nearly 19% over the past two days around speculation that it's looking to get bought out by private equity. today shares move lower in today's trade. back to you, maria. >> all right. seema, thank you so much. kkr is out with its outlook. the firm sees a big move out of bonds and cash among other significant calls. henry mcveigh is the head of global and asset management at kkr and joins us now for a cnbc exclusive. good to see you. >> thanks for having me. >> before we get to your ideas for 2013 we all know private equity is looking at dell. is kkr involved in this dell deal? >> i can't comment on that. >> what about the whole m & a story in 2013? is there reason to believe that
we will see more private equity money going into some deals? >> yes. i think one of the things we highlight in the piece, the second half of last year, what we saw were earnings really coming down, expectations being ratcheted down at the same time the stock prices were going up. that's not a great equilibrium for mna activity and os. my view good forward is you'll have a better become damn we've been trying to use the volatility to our advantage and 2011 put a lot of money to work when it was very unsettled. last year we were not as active and this year us a look towards this year, it will be a better year. >> i thought it was interesting in your report, you talked about the second half of the year. >> yeah. >> being stronger than the first half. take us three tween. what are you looking for? >> first half of the year, particularly in the first quarter, much slower earnings. i think as you head towards the back half of the year we see four pillars driving earning as well as the economy. autos, housing, manufacturing and energy. we think the private recovery
gdp could be 3%, offset by fiscal headwinds in the government, but we think it's a pretty good backdrop and seeing lots to do. travel all the time. been in europe and asia, there's some things we're very excited about that we're partnering with our clients, and i think we'll make good money. >> you also talk about being overweight real assets. what do you mean by real esas? >> one thing in our energy group, one of the pioneers in this group, going to the energy companies and also buying wells and oil in the ground so i would think about it ahead of our group who likes to say we're creating bonds in the ground so oil where you get a yield and inflation protection and growth. that's hard to match when you think about a tip security where you actually have to pay for the yield, so that's been a very exciting area. same thing in real estate. we've been doing a lot with the firm's balance sheet. one thing we try to eat what we're cooking and have almost a $7 billion balance sheet. ralph rosenberg who heads our
real estate area very active with the firm's capital as well as partnering with clients to find some pretty interesting things, both in the u.s. as well as some things in europe. >> how much do you think is priced into the market when you look at housing and autos, these sort of economically sensitive areas that you think will do very well. >> yeah. >> in terms of driving stocks. >> i think we've had a big -- >> a lot of different asset classes. not priced in the market, when i think about our credit and ill liquid lending business, we're finding a lot of things going on in the small and medium-sized businesses. let me explain. if right now high yield's trading at a 5% yield, a lot of small and medium-sized businesses that can't get credit, both in europe as well as it, and we're able to lend to them to get them to grow their businesses and restructure, so there's an ill liquidity premium of almost 400 basis points that. to me is definitely not priced in the market, and i think when we first started talking, covering financials many, many moons ago. >> yeah, i know that.
>> what's happened is the financial services industry, their dealer inventories or balance sheets have dropped 80% from 300 billion to 50 billion. that makes it very hard, if you're a company issuing bonds, not much inventory out there, so what's happened is dell or cisco and procter & gamble, they can probably issue bonds at very tight rates, but if you're a small or medium-sized business you're not in that deal or inventory so your spreads have widened and what's happened it's created an opportunity for firms like kkr to partner with these businesses to help them grow so that to me is definitely not priced in the market. >> i see. >> on the equity side, obviously had a very robust start to the year. >> and even with the fiscal issues at end of last year. >> if you take your kids bowling and they put the foam in the gutter where the ball can't go in the gutter, that's essentially what the central banks have done, taken out some of the tail risk. the price you pay is the ball slowing down, the lanes slower in the form of economic growth,
but that has allowed people to own more risk assets, and so to me the equity market, if we use the s&p and as a proxy, 1550s upside for the year. right about earnings plateauing and reaccelerating, there are things to do. >> yeah. >> but it's definitely to me you have to pick your spots. we have 17 offices. we operate across all asset classes, and not everything is a buy. trying to be selective in terms of how we're deploying capital. >> but are you making a point saying, look, want to be making a steady move out of bonds and cash. >> take a step back. when we -- when we look at real yields, they are negative 75 basis points. >> losing money by keeping money in money markets. >> yeah, and you think about -- you think about if high yield was a storks trading at 18 times when s&p stocks are trading at 13 or 14 times. credit spreads are very tight. what we're saying is find things that have some interest rate sensitivity, bank loans, direct lending, equities with low payout ratios but high cash balances.
i think those are the things, it's not a -- not, you know, a revolution, an evolution, but we think we're structurally at the bottom of the rate cycle, and we think the fed, if you look at what's happening with the fed or in japan, what's happening in japan? they are saying we can't stand deflation anymore. what is bernanke saying? i'm daying my fed policy to unemployment. that is a red call gesture, and what i think he's signaling to the market is cash is no longer acceptable and no government bonds are no longer acceptable. i'm going to push you into things that are non-deflationary. >> risk. >> and that is -- >> and i don't think he wants you to be crazy with risk, but i think what he's saying is look around because we're creating an environment where you can have economic growth, and we're not going to penalize you from a monetary standpoint. >> right. >> i watch your report, as many folks do, and one thing as you described the cycles, always talked about, hey, we've got good economic growth, but the fed is going to be pulling away the punch bowl. >> exactly, yeah. >> we have a little bit of a backdrop that started about 2011
with the fed signaling you can have the economic growth, and we're to pull away the b punch bowl. >> we have a good market in 2013, but we might be able to get to the market at better prices. very quickly. >> yeah, look, i think we still have a lot of issues around the debt ceiling, our base view is you're going to have volatile till here. we use that to add. we still like the bank loans, we like the direct lending, private equity is core to what we do. plenty of things to do to partner to our clients. it's not crazy bullish, but very good. >> good to have you on the program. henry mcvey. busy morning ahead. our panel will tell you what will move your money first thing thursday. stay with us. twins. i didn't see them coming. i have obligations. cute obligations, but obligations. i need to rethink the core of my portfolio. what i really need is sleep. introducing the ishares core, building blocks for the heart of your portfolio.
30 seconds on the clock now. our next guests will tell you what to be prepared for tomorrow morning. gentlemen, good to see you. quint, you're up. 30 seconds on the clock. what will you be watching tomorrow? >> thanks, maria. i don't think we're going to see many surprises with the economic numbers tomorrow, jobless claims
or housing starts. we're more interested in the reaction to bank of america's earnings. they're coming out in the morning. i think they're going to say good things but the stock has had a tremendous run. we want to see if the bulls have the powder to keep it going. aftermarket, we'll be watching intel. we think there could be a shift from the financials which have been hot to the tech which has been terrible. we'll look for those companies to report and see what they have to say. >> all right, we will, as well. bruno, you're up with 30 seconds on the clock. >> the main thing we'll be looking at tomorrow is the energy information administration natural gas report. we expect a continuation of a strong trend. also, tomorrow, the ipo of cvr refining. that is the second ipo this week. we have a third, ml-ipo on friday. and as the u.s. continues to work towards greater energy independence, we will continue to see an expansion of the investor opportunities in the space. >> all right, stephen, thank you so much, we appreciate that, stephen, you're up.
what do you want to look at tomorrow? >> we're watching the bank earnings, as well. i think bank of america more important than the numbers. they preannounced the numbers, basically. i think it's going to be the conference call. are they addressing countrywide? are they addressing the litigation with mbi? we're going to watch citibank's earnings, as well. the tail wind that was mortgage, new mortgages, is now turning into a head wind. margins are coming in, nim, and mortgage margins, so, that's what we're going to be watching for. that continues. >> good stuff, guys. appreciate your time tonight and we'll be focused on all of those issues for tomorrow's opening bell. a big mistake was made at jpmorgan on jamie diamond's watch. he took responsibility, he paid a price, literally. my observation on why that's so unusual these days, as america looks for real leadership. stay with us. ♪
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